2018 (1) TMI 1054 - AT - Service Tax

Whether the appellant can be allowed to adjust the excess paid service tax to the liability payable for the subsequent months? - Held that - The Tribunal in the case of General Manager (CMTS) Vs. Commissioner of Central Excise, Chandigarh 2014 (8) TMI 589 - CESTAT NEW DELHI , where it was held that if excess payment of tax in a month is not on account of reasons involving interpretation of law, taxability, classification, valuation or applicability of exemption notification and is purely on account of inability of the assessee to exactly determine the total amount collected during the month against the bills raised, as a result of which he had determined his tax liability or estimation basis, the excess amount of tax paid during the month can be adjusted against his tax liability during other months and in this regard, there cannot be any monetary limit - the demand raised on this ground is unsustainable and requires to be set aside. CENVAT credit - service tax paid on advertisement on MTC buses - Held that - As per Rule 3 of CENVAT Credit Rules, credit can be availed on service tax / duty when the documents evidence the payment of the same. Since the documents on which credit has been availed does not evidence the payment of service tax, we are of the view that the credit availed is incorrect - demand upheld. CENVAT credit - rent-a-cab service - Held that - During the relevant period, prior to 1.4.2011, the definition of input services included the words activity relating to business . Therefore, the definition had wide ambit and had included the services namely rent-a-cab service - In Commissioner of Central Excise, Raipur Vs. Beekay Engg. & Castings Ltd. 2009 (6) TMI 96 - CESTAT, NEW DELHI , the said services have been held to be eligible for credit - the disallowance of credit is unjustified. CENVAT credit on capital goods imported during the period January 2007 - Held that - According to Rule 4(2) of CENVAT Credit Rules, 2004, credit can be availed not exceeding 50% of duty paid on capital goods in the same financial year and the balance amount of CENVAT credit has to be availed in the subsequent year. Therefore, availment of entire credit in the same financial year is irregular - The appellant has not contested the same and therefore the demand of service tax under this category is sustained. Penalties - Held that - The ld. counsel has explained that the appellant had not rendered any sponsorship service and they had only extended donations to orphanage and charity purpose and it was wrongly accounted in their books of accounts as sponsorship service. Taking into consideration these aspects, the penalties in regard to these issues are unwarranted and requires to be set aside which we hereby do. Appeal allowed in part.

Summary

Issues Involved:
1. Adjustment of excess service tax payment.
2. Non-payment of service tax under sponsorship services.
3. Irregular availment of CENVAT credit on input services.
4. Disallowance of CENVAT credit on rent-a-cab service.
5. Wrong availment of CENVAT credit on capital goods.
6. Imposition of penalties.

Issue-wise Detailed Analysis:

1. Adjustment of Excess Service Tax Payment:
The appellants paid an excess amount of ?47,62,715/- as service tax in March 2007 and adjusted this amount towards their service tax liability for April 2007. The department contended that such adjustment is not permitted by law, resulting in a demand for short-payment of service tax. The Tribunal referred to the decisions in *General Manager (CMTS) Vs. Commissioner of Central Excise, Chandigarh* and *Plantech Consultants Pvt. Ltd. Vs. Commissioner of Central Excise, Pune*, which allowed such adjustments under sub-rule (4B) of Rule 6 of Service Tax Rules. The Tribunal concluded that refusing such adjustments would amount to collection of tax without authority of law, contrary to Article 256 of the Constitution of India. Thus, the demand on this ground was set aside.

2. Non-payment of Service Tax under Sponsorship Services:
The appellants did not contest the demand related to non-payment of service tax under the category of sponsorship services. They admitted that the amount shown as sponsorship in their books was actually donations for charity. The Tribunal upheld the demand on this issue.

3. Irregular Availment of CENVAT Credit on Input Services:
The appellants availed CENVAT credit on service tax paid by Metropolitan Transport Corporation (MTC), Chennai, for advertisements on buses based on the rate quoted in the agreement, though the invoices did not show the tax paid. The Tribunal held that as per Rule 3 of CENVAT Credit Rules, credit can only be availed when the documents evidence the payment of service tax. Since the invoices did not indicate the service tax paid, the credit availed was deemed incorrect, and the demand was sustained.

4. Disallowance of CENVAT Credit on Rent-a-Cab Service:
The appellants availed credit on service tax paid for rent-a-cab services used for transporting employees and executives. The Tribunal noted that prior to 1.4.2011, the definition of input services included activities related to business, which encompassed rent-a-cab services. Citing the decision in *Commissioner of Central Excise, Raipur Vs. Beekay Engg. & Castings Ltd.*, the Tribunal found the disallowance of credit unjustified and set it aside.

5. Wrong Availment of CENVAT Credit on Capital Goods:
The appellants availed the entire credit on capital goods imported during January 2007 in the same financial year, contrary to Rule 4(2) of CENVAT Credit Rules, which allows only 50% credit in the first year and the remaining in subsequent years. The appellants did not contest this issue, and the demand was upheld.

6. Imposition of Penalties:
The appellants argued that the penalties should be set aside as they availed credit on a bona fide belief and the infractions were procedural. They explained that the non-payment of service tax on sponsorship services was due to a misclassification of donations as sponsorship. The Tribunal considered these aspects and deemed the penalties unwarranted, thus setting them aside.

Conclusion:
The Tribunal modified the impugned order by allowing credit on rent-a-cab services and setting aside the demand for irregular adjustment of excess payment. The other demands were upheld, but the penalties were set aside. The appeal was disposed of accordingly.